Glencore Xstrata chief executive officer Ivan Glasenberg said Xstrata’s greenfield projects had been deprioritized, with a material reduction in scope and costs.
“We’re fearful of greenfield projects,” he said, describing them as disproportionately risky.
Glasenberg said greenfields projects of recent years had been subject to cost overruns averaging around 35%.
The $7 billion Wandoan coal project in Queensland’s Surat Basin was confirmed as being on hold.
Wandoan, which would have been a mining powerhouse in the newly emerging Surat Basin coal mining province, was still awaiting a mining license from the Queensland government and had unresolved legal issues with local landowners.
The company said other early-stage Australian coal projects that would be left on the shelf included the Pentland and Sarum projects in Queensland and the Running Stream project in New South Wales.
The world’s largest thermal coal producer also confirmed it expected to realize at least $US2 billion of merger synergies next year, while slashing capital expenditure.
Glencore said the integration of it and Xstrata had been completed within three months with no operational disruption.
When the merger was completed in May, the company flagged around $500 million of synergies but has increased that figure to at least $2 billion.
Of that amount, $450 million will come from marketing synergies, $175 million from financing synergies and $1.4 billion through cost savings at regional and head offices.
Glasenberg said phases one and two of synergies was complete and the focus would now be on phase three – operational asset efficiency, with the review of the coal business already well advanced.
“We are only just starting to comprehensively look at the combined mining and metallurgical operations,” he said.
Glencore said it had identified its core assets and the phase three restructuring aimed to have a tier one asset position by 2015.
"Glencore will have a diversified and defensive asset base with an increasingly strong cost curve position,” Glasenberg said.
